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3 1604 

9 699 182 

70.12/2: C23 

r~\ Case Studies 

Carr Mill, 

Carrboro, North Carolina 

A Rehabilitation Project under 
the Tax Reform Ac^J^U 

JUN ft 

by Margaret A. Thomas 

Heritage Conservation and Recreation Seryi 
Technical Preservation Services Division * 

U.S. Department of the Interior 

Washington, D.C. 20243 


Introduction 1 

Historic Overview 3 
Rehabilitation Strategy 6 

Public Involvement 10 

Rehabilitation Work 14 

Project Economics 19 

Project Benefits 28 

Acknowledgements 31 



Rehabilitation of a turn-of-the-century textile 
mill received widespread community support in 
Carrboro, North Carolina, partly because of local 
sentiment for the historic industrial building 
and partly because of the potential positive impact 
of the project on the small town's depressed 
commercial district. Located on an eight-acre 
site in downtown Carrboro, the two-story brick 
mill had been empty for many years before its 
redevelopment in 1976 by Carr Mill, a general 
partnership formed for the rehabilitation project. 

Redevelopment has included conversion of the first 
floor of the mill into a shopping mall, reuse of 
the second floor as office space, and construction 
of additional shopping facilities on the property. 
In addition to increasing, the shopping opportunities 
in Carrboro and answering a growing need for office 
space, the rehabilitation project has added to the 
tax base of the community through reuse of the 
long-vacant property. The businesses in the new 
complex have created a total of more than 239 perm- 
anent jobs in the community. 

Despite a 15-year track record in shopping center 
development by members of the development team, the 
partnership experienced difficulty in obtaining 
initial financing. However, the success of the 
first phase of the complex, involving the shopping 
mall and the new construction later enabled the 
developers to refinance the project with a permanent 
mortgage from Connecticut Mutual Life Insurance 

Federal Assistance for 
Rehabilitating Historic 
Bui Idings 

Section 2124 of the Tax 
Reform Act of 1976 offers 
important tax incentives 
for the rehabilitation 
of historic buildings. 
Owners of eligible de- 
preciable structures may 
amortize qualified re- 
habilitation expenses 
over a five year period 
or take accelerated de- 
preciation on the value 
of the rehabilitated 
property. A third in- 
centive, an investment 
tax credit for rehabili- 
tation, is available 
under section 315 of the 
Revenue Act of 1978. 

The Heritage Conservation 
and Recreation Service, 
U.S. Department of the 
Interior, issues the 
necessary certifications 
to qualify owners of de- 
preciable historic build- 
ings for the incentives 
provided by the Tax Re- 
form Act of 1976 aad the 
Revenue Act of 1978. The 
Internal Revenue Service, 
U.S. Department of the 
Treasury, makes deter- 
minations regarding the 
tax consequences of these 
certifications . 

The tax incentives for historic structures contained 
in section 2124 of the Tax Reform Act of 1976 permit 
the four partners to deduct rehabilitation expenses 
amounting to almost $2,000,000 over a five year 
period, a substantial tax benefit for Carr Mill, Ltd. 
In order to become eligible for the tax provisions, 
however, approvals of the completed rehabilitation 
work had to be obtained from both State and Federal 
historic preservation offices. Although the part- 
nership began project planning before the Tax Reform 
Act was passed, developer B.J, Allison now 
sees the rapid amortization of rehabilitation 
expenses as a major incentive for development of 
historic buildings such as Carr Mill. "If we were 
to do another shopping center rehab," Allison states, 
"we would definitely do it because of the tax 
incentives. " 

The renovation of Carr Mill, aided by Federal tax 
incentives for qualifying historic buildings, has 
been a great success for the developer and for the 
town of Carrboro, North Carolina. This success 
depended not only on the combination of rehabili- 
tation with adjacent new construction, but also on 
the integration of the development team's goals and 
objectives with the interests of the community. 
Municipal leaders, State preservation officials, 
and concerned citizens all made significant contri- 
butions to the development team's plans for the 
property. The developers and these other diverse 
participants in the project all agree, in retrospect, 
that the rehabilitation of the mill has bolstered 
the image of Carrboro, lending a new sense of iden- 
tity and pride to the small community. 

The town of Carrboro has grown dramatically in the 
last decade, absorbing much of the overflow popula- 
tion from the expanding campus of the University of 
North Carolina in adjacent Chapel Hill. With the 
redevelopment of the mill property, Carrboro has 
begun to draw shoppers from beyond its own popula- 
tion of 13,000, reaching into a larger market area 
which encompasses not only Chapel Hill but also the 
larger cities of Durham and Raleigh (12 and 35 miles 
away, respectively). 

Carr Mill 
Pro j ' ect Data 

Date of Construction: 

Date of Rehabilitation: 

New Use: shopping mall 
and offices 

Old Use. 

textile mill 

Type of Construction: 
Loadbearing brick mas- 
onry with timber- framed 
floor and roof system 

Gross Building Area: 

80,232 square feet in 


36,225 square feet of 

new construction 

Net Rental Area: 

70,796 square feet in 


36,225 square feet of 

new construction 

Total Costs: 
$2,800,000 ($26.16 per 
square foot) 

Tax Treatments: 
Five-year amortization 
of qualified rehabili- 
tation expenses (section 
191 of Internal Revenue 

continued on page 4, column 1 

Like many industrial structures of its type, the 
architectural character of the mill lent itself to 
easy adaptation: the heavy structural system 
provided ample support for the new uses, high 
ceilings allowed adequate space for installation of 
mechanical equipment, and the large open floor areas 
minimized the need for interior demolition and 
allowed convenient subdivision with modern materials. 

Historic Overview 

Carr Mill has occupied a central position in Carr- 
boro' s development, both physically and economically, 
since the turn of the century. Constructed in 1899, 
twelve years before the town of Carrboro was incor- 
porated, the mill was one of several small indus- 
tries which sprung up around the West Chapel Hill 
railroad depot. The depot, located at the end of 
a short spur line, was established in 1882 to serve 
the nearby University of North Carolina. As local 
farmers also began to utilize the railroad line, a 
cotton gin, sawmill, grain mill, and cotton mill 
were established in the area. Carr Mill, first 
known as the Alberta Cotton Mill, flourished under 
the ownership of Thomas Lloyd, expanding from 4,000 
to 10,000 spindles in one decade. 

In 1909 the mill was sold to General Julian S. Carr, 
a prominent industrialist and financier from Durham. 
The building became one of many factories in Carr's 
Durham Hosiery Company, a major chain which was one 
of the largest hosiery operations in the world 
during the first quarter of the twentieth century. 
On the promise that the Durham Hosiery Company would 
supply electricity to the small industrial village, 
the town was renamed Carrboro in 1913, in honor of 
General Carr. 

A victim of the depression, Carr Mill closed in the 
1930' s, and remained vacant until after the second 
World War, when it was purchased by Pacific Mills 
of Boston for use as a woolen mill. The BVD Company 
subsequently purchased the mill and used it for 
sorting and shipping of underwear. The mill was 
sold again in 1967 to the EDY Corporation of Chapel 
Hill, but remained vacant except for occasional use 
as warehouse space. 

Accelerated depreciation 
on new construction 
(150% declining balance 

Dev eloper : 
Carr Mill, a 
general partnership 
c/o B.J. Allison 
3520 NCNB Plaza 
Charlotte, NC 28280 

Project Architect: 

R. Gray Miller, AIA 

Miller Associates, Inc. 

(formerly with Miller/ 


11500 Turnstone Court 

Pineville, NC 28134 

General Contractor: 
Wooten-Brawley & Co . , 
Inc . 

P.O. Box 1777 
Statesville, NC 28677 

Lending Institution: 
Connecticut Mutual Life 
Insurance Company 
140 Garden Street 
Hartford, CT 06115 

State Historic 
Preservation Office: 
Division of Archives 
and History 
109 East Jones St. 
Raleigh, NC 27611 

The mill 3 originally constructed in 1899 3 had 
remained vacant for over 10 years except for 
occasional use as warehouse space. The one story 
mechanical equipment room seen here was removed 
during the rehabilitation. Many of the windows 
which had been bricked up in the 1950s were re- 
opened as part of the overall rehabilitation, 
(photo courtesy of H. Brinton) 

During the more active years of milling operations, 
several major additions to the mill building 
were made. The length of the mill was almost 
doubled in the early twentieth century by an addi- 
tion to the west. Next, a two-story north wing 
(the only portion of the building with a basement) 
was constructed around 1913 followed by a one- 
story office wing attached to the south side of the 

All of the early portions of the mill are identical 
in their simple design, each featuring large, 
evenly-spaced, multipaned windows topped by seg- 
mental arched fixed transoms. Entrances are 
articulated by elliptical arches. The horizon- 
tality of the mill, emphasized by the long rows of 
windows, is broken only by five stair towers which 
rise slightly above the main roofline. 

The three final additions to the building, dating 
from the mid-twentieth century, included a window- 
less warehouse area, called the east wing: an 

wing, 1918 

room, 1950 

building, 1899 

wing, 1945 

First addition, 1915 

^r N 

Architectural evolution of 
Carr Mill (George Siekkinen) 

infill structure between the two protruding towers 
on the south facade; and a one-story mechanical 
room, since removed. With the exception of those 
in the north and the office wings, virtually every 
window in the building was bricked-in during the 
1950s when Pacific Mills installed air condi- 
tioning in the complex. 

Various other industrial structures, including a 
railroad line, an electrical substation and four 
hexagonal brick fire hose houses, were added over 
time to the millyard property. The southwestern 
portion of the mill property remained a broad green 
area, planted with large shade trees. 


North Greensboro Street 



□ □ □□□ 














1001 — 
Or— ' 


1 Original mill building 

2 New construction 

3a Parking lot with farmers market 
3bParking lot 
4 Auxiliary Parking lot 

Site Plan 

(Drawing by George 

Carr Mill, the railroad depot, and a small grist 
mill were nominated to the National Register of 
Historic Places as the most significant vestige of 
Carrboro's industrial origins by the North Carolina 
State Historic Preservation Officer (Division of 
History and Archives) . Ten acres and three build- 
ings, known as the Alberta Mill Complex, were 
entered in the National Register in January 1976. 

The mill property occupies eight acres of this 
downtown historic complex, which is bounded on the 
south and west by main thoroughfares, on the east 
by now-defunct railroad tracks, and on the north by 
residential property. A block of commercial build- 
ings faces the mill across Weaver Street (the south 
boundary), and other detached commercial structures 
lie across North Greensboro Street to the west. 

Rehabilitation Strategy 

An unused property, the vacant mill and its 8-acre 
site were a drain on the economic vitality of Carr- 
boro's central business district. Recognizing the 
need for commercial activity in this location, 
municipal officials and representatives of the EDY 
Corporation which owned the property began to encou- 
rage development proposals for the site. 

Although a feasibility study of the property in 1971 
called for reuse of the mill as a shopping bazaar, 
the project was never initiated for lack of funding. 
In the spring of 1975, the EDY Corporation received 
a tentative commitment from an Atlanta-based corpor- 
ation to purchase the property, demolish the mill, 
and construct a $2 million shopping center. When 
the community became aware that the proposal called 
for demolition of the mill, many citizens began to 
express interest in preserving the mill. 

This community concern became a factor in the race 
for mayor of Carrboro in late 197 5, when the future 
of the mill figured prominently as a campaign issue. 
Candidate Ruth West, who had once been employed in 
the mill, made the preservation of the mill one of 
the prime issues in her successful campaign. State 
preservation officials also assumed a strong advo- 
cacy role for preservation of the mill. Brent 

Glass, a Carrboro-resident who was under contract 
with the State Historic Preservation Office to do a 
local survey of historic industrial and engineering 
sites, initiated the nomination of thv± Alberta Mill 
Complex to the National Register. Glass, who now 
holds the position of North Carolina's Deputy State 
Historic Preservation Officer, also served as an 
informal consultant to the town as development 
proposals for the property were considered. 

when the Atlanta corporation decided not to exercise 
its option, the EDY Corporation began negotiations 
with Southern Real Estate in Charlotte, a long- 
established North Carolina firm in business since 
1899. By the fall of 1975, Southern Real Estate, 
which owns and manages seven shopping centers in 
North Carolina, had produced a proposal which called 
for reuse of the mill as a shopping center and con- 
struction of auxilliary buildings on the property to 
accomodate a grocery and drug store. In exchange 
for ownership of the property, valued at $300,000, 
the EDY Corporation became a general partner in the 
newly formed Carr Mill with three principals of 
Southern Real Estate assuming positions as limited 
partners. The partnership chose a Charlotte, North 
Carolina architectural firm, Miller/Steever/Finch 
(now dissolved), both to rehabilitate the mill 
and to design the new building. 

As a preliminary step in the development process, 
Southern Real Estate ran a marketing survey on the 
area, evaluating rental rates and vacancy levels 
for commercial space in downtown Carrboro and 
Chapel Hill and in nearby shopping malls. The 
turning point in project planning came in March 
1976 with lease commitments from a regional 
grocery chain and a national drug store company 
to occupy space in a new building planned for the 
northeastern corner of the mill property. As pro- 
spective tenants, both these companies ran their 
own market surveys before agreeing to the 
development plan. Commitments from these "Triple 
A" anchor tenants which each had a net worth of 
more than $5 million enabled the developers to 
obtain initial construction financing for the new 
building and for the shopping mall within the mill. 

Redevelopment Time Sequence 

Investor commitment 

Land acquisition 


Preservation designations 

Conditional use permit 

Architect involvement 




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The initial proposal called for reuse of only the 
first floor of the main portion of the mill, with 
the second floor and the north and east wings to 
remain vacant indefinitely. However, in the spring of 
1977, with the new construction and the rehabili- 
tation work on the interior shopping mall well 
underway, the developers were approached by 
several public agencies with requests for office 
space in the building. The first inquiry came 
from North Carolina Memorial Hospital, which wanted 
to move its kidney dialysis laboratory out of the 
nearby hospital and into a satellite facility. A 
positive response by the developers to this request 
led the hospital to propose a transfer of three 
additional administrative divisions out of the 
critically overcrowded hospital and into the mill. 
Other unsolicited leasing requests came from a 
North Carolina Vocational Rehabilitation Area 
Office and a regional office for Southern Bell 

This unanticipated demand for office space 
encouraged the developers to undertake another 
phase in the project, involving reuse of most of 
the second floor of the main portion of the mill 
as rental office space. Because of the heavy 
demand for the space, lease commitments were made 
before rehabilitation work began, and the offices 
were custom designed for individual tenants. 

With the commercial portions of the complex in 
operation and multiple commitments received from 
major office tenants, the partnership was able 
to obtain a commitment in June, 1977 to refinance 
the project with a permanent mortgage from 
Connecticut Mutual Life Insurance Company. 

Also at this time, the partnership was informed 
by the State Historic Preservation Office that, 
because of Carr Mill's listing on the National 
Register of Historic Places, the rehabilitation 
work on the mill was eligible for tax benefits 
under the Tax Reform Act of 1976. A preliminary 
analysis of the tax incentives by the partnership 
indicated that the rehabilitation provisions 
could be of substantial benefit to the project 
by providing a shelter for the cash flow, in the 




form of an income tax deduction. Carr Mill 
therefore decided to apply for the required 
historic preservation certifications from the 
Department of the Interior. 

With permanent financing secured and the prospect 
of advantageous tax write-offs for the project, 
the developers decided to undertake a third and 
final phase of work, involving redevelopment of 
the remaining portions of the mill (the north, 
east, and office wings) as a restaurant and 
offices. Eighty percent of the net rental space 
was leased before construction was initiated. 

Design and construction work on the mill complex 
stretched over two and a half years, reflecting the 
progressive changes in the overall development 
strategy for the property. The first phase, involv- 
ing development of the shopping mall on the first 
floor of the mill, construction of the grocery and 
drug store building, and site work, was begun in 
August, 1976; the grand opening for the mall was May, 
1977. The second phase, completed in February, 1978, 
involved renovation of rental space on the second 
floor as offices; and the third and final phase, 
involving redevelopment of additional office space, 
was completed in mid-1979. 

Parking requirements for the rental portion of the 
complex, determined by the square footage of the 
buildings, were met by an existing asphalted area 
on the southeastern corner of the property and 
construction of a large new lot to the northwest. 
With the initiation of the second phase of the 
project, a 2-acre parcel of vacant land, located 
across Weaver Street within 500 feet of the mill 
property line, was leased to the partnership in 
March, 1977 by the EDY Corporation for development 
as additional parking to serve the offices. About 
360 parking spaces are available on the mill 
property and about 200 in the auxiliary lot. 

Public Involvement 

Although the mill property was appropriately 
zoned for the proposed new uses, the developers 
had to secure a "conditional use" permit from 


Conditional Use Permit 

The 'initial 'permit issued 
by the Town of Carrboro 
for Carr Mill included 
the following conditions: 

5,< Town Appearance Com- 
mision approval of the 
exterior design for the 
new construction (to be 
harmonious with the old 

^Dedication of the south- 
western lawn as open 
space for public use 

^Preservation of as many 
existing trees as poss- 
ible in the parking lot 

*Grant of 12-foot rights 
of way for widening of 
the public streets in 
two areas adjacent to 
the mill property 

*Const ruction of public 
sidewalks on two boun- 
daries of mill property 

^Complete screening of 
trash receptacles and 
compactors for complex 

*placement of all util- 
ities underground 

the Town of Carrboro before any work could begin. 
This mill project represented Carrboro' s first 
application for a "unified business development" 
permit, defined as a combination of uses housed 
within more than one building on the same lot. 

The process therefore was more lengthy and less 
smooth than it might have been if the town had 
had previous experience with this type of project. 
Almost three months of negotiations involving 
public hearings, municipal staff review and 
meetings of the Planning Commission, the Appear- 
ance Commission and the Board of Aldermen 
preceded issuance of the conditional use permit. 

The interests expressed during this time by 
citizens and by the town government primarily 
concerned preservation of the park-like lawn on 
the southwestern portion of the property and of 
the existing trees in the proposed parking areas. 
Other important concerns included the appearance 
of the new construction; vehicular access into 
the complex and traffic circulation within it; and 
linkages between the development and existing 
nearby commercial properties . Developer-Town 
negotiations, which lasted from December 1975 to 
February 1976, saw certain modifications to the 
original redevelopment plan to satisfy community 
and municipal interests. 

As a major condition in the permit, the developers 
agreed to retain the landscaped southwestern 
portion of the property as open space, for use 
by the town and by the general public. A 
commitment was also made to save as many trees 
as possible in the area to be redeveloped for 
parking . 

According to the permit, the design of the major 
facades of the grocery and drug store building had 
to meet the approval of the Appearance Commission, 
a publicly appointed citizens body concerned with 
programs of general community beautif ication in 
the town and its environs. The primary demand of 
the Commission was that the design of the new 
building had to be harmonious with the existing 
mill building. Both the grocery and the drug 


store chains therefore were persuaded to forego 
their standard storefront designs for a more 
compatible architectural treatment. 

To minimize traffic congestion expected from the 
development, the Town required the developer to 
grant rights of way in two areas so that the 
public streets could be widened. As an encour- 
agement to pedestrian traffic, the Town also 
required a public entrance on the south side of 
the building for access between existing commercial 
buildings on Weaver Street and the new shops in 
the mill. 

As subsequent phases of the project unfolded, the 
developers returned to the Town of Carrboro with 
a request for an amendment to the conditional use 
permit. In December 1976 the Town granted an 
amendment to allow office use of the second floor 
of the mill, with the stipulation that the 
developers bear the cost of widening the public 
access road and providing sidewalks into the 
newly acquired parking area. The conditional use 
permit gives the developer the option to apply 
at a later date for an amendment allowing 
additional new construction such as a bank, on 
the mill property. 

The cooperative relationship between the Carr Mill 
partnership and the Town was evidenced in another 
amendment, initiated by the Town in February 1978 
with the developer's approval and permission, to 
allow a Farmer's Market in the second parking 
area on weekends. A permanent open-air structure 
for the market was constructed with the assistance 
of a $25,000 matching grant from the State of 
North Carolina. It was matched in kind by the 
Town of Carrboro with their provision of the site. 
It began business in 1978. 

In addition to the involvement of town officials in 
the Carr Mill redevelopment, State and Federal of- 
ficials played an important role in establishing 
the eligibility of the project for the rehabili- 
tation tax incentives contained in the Tax Reform 
Act of 1976. To qualify for the tax incentives, 
a property owner must obtain certifications from 


the Department of the Interior that the building 
is both historic (a "certified historic structure") 
and that the completed rehabilitation is consis- 
tent with the historic character of the property 
(a "certified rehabilitation"). This necessitates 
completing an Historic Preservation Certification 
Application, which is submitted to the appropriate 
State Historic Preservation Office and then for- 
warded to the Department of the Interior, where 
certifications are issued. The overall certifi- 
cation process generally takes between 45 and 90 

Because the Alberta Mill Complex is individually 
listed in the National Register of Historic Places, 
Carr Mill automatically qualified as a "certified 
historic structure." (Had the mill complex been 
listed within a registered historic district, 
rather than listed individually, a brief descrip- 
tion of the historical and architectural signifi- 
cance of Carr Mill to the overall district would 
have been required on the application before 
the "certified historic structure" designation 
could be given.) 

Plans and specifications for the rehabilitation 
work on the first two phases of Carr Mill were 
reviewed by the staff architect of the North 
Carolina State Historic Preservation Office and 
forwarded to Federal preservation officials in 
October 1977 with the recommendation that the 
rehabilitation be approved. In November, the 
Department of the Interior determined that 
photographs and additional information were 
required to make a decision on the project. These 
supplemental materials were received in February, 
1978, and the completed first two phases of the 
project were designated as a "certified rehabili- 
tation" shortly thereafter. The partnership 
began the five-year rapid amortization of 
qualified rehabilitation expenses for phases one 
and two on the tax return filed for the year 1977. 

Additional documentation describing the work to be 
undertaken during the third phase was submitted by 
the partnership in late 1978. Upon notification 
by the partnership in July, 1979 that the third 


phase was completed, Federal preservation officials 
issued a "certified rehabilitation" designation, 
making expenses for the final phase also eligible 
for the rapid amortization provision of the Tax 
Reform Act of 1976. 

Rehabilitation Work 

The basic concept for rehabilitation of the mill 
called for preserving and highlighting the 
significant architectural features of the 
building, both on the exterior and the interior. 
To recapture more of the older appearance of the 
structure, many of the mill's bricked-in windows 
were reopened, and, on the interior, masonry walls, 
heavy timber posts and beams, and maple floors 
were left exposed wherever possible. New con- 
struction was designed to harmonize with the old 
building, and site work was undertaken to clean 
up the property and provide sufficient parking 
and access without destroying the park-like 
character of the southwestern portion of the 

Both the rehabilitation work and the new construc- 
tion were reviewed by preservation officials in the 
North Carolina Division of Archives and History and 
in the Heritage Conservation and Recreation Service 
for conformance to the Secretary of the Interior's 
"Standards for Rehabilitation." Utilized to eval- 
uate rehabilitation work under the Tax Reform Act 
of 1976, these ten standards are broadly worded to 
ensure that the significant architectural features 
of a building are preserved during the process of 
rehab il it at ion . 

Architectural plans for the project also were 
reviewed by the State of North Carolina's Depart- 
ment of Insurance, which has jurisdiction over 
building code requirements for both new 
construction and rehabilitation. Review focused 
particularly on fire exits and regulations. 
Although four-hour fire walls were required 
between the oldest portion of the mill and the 
north, west and office additions, this specifi- 
cation did not cause design problems because the 
existing masonry bearing walls at these junctures 


satisfied the requirement. To meet State code 
requirements, all the heads and some pipes in the 
existing sprinkler system had to be replaced; 
although this system with improvements was 
adequate for the exposed wooden ceilings, an 
additional system had to be installed to serve 
areas with dropped ceilings. 

The mill rehabilitation and the new construction 
were handled by one general contractor, with a 
single supervisor overseeing all work on the 
property. Although the contracting firm, Wooten- 
Brawley and Company of Statesville, North Carolina, 
had previously worked on the renovation of several 
old mills in the State, the Carr Mill project 
represented their first involvement in conversion 
of an industrial building to a new use. 

Initial redevelopment work involved clearance of 
the site, including removal of a power company 
transmission line and substation, a portion of 
railroad track, a loading dock, and the mid- 
twentieth century mechanical room on the mill. As 
the exterior facades of the mill did not appear 
heavily layered with dirt, a decision was made not 
to clean the brick. Tuckpointing was limited to 
a few areas where bricks had been damaged by 
removal of iron rods from the facade. This con- 
servative approach to cleaning and tuckpointing 
exterior brick surfaces which minimizes possible 
damage to the historic fabric of a building was 
applauded by State and Federal preservation 
officials in their reviews of the partnership's 
application for the tax incentives. 

The mill's existing built-up roof, which had a low 
pitch, was replaced in kind; an expansion joint 
was installed the length of the roof ridge to 
prevent damage from thermal expansion. 

A major expense in the project involved rehabili- 
tation work on the industrial-scaled double-hung 
wooden windows, which each measure 5' by 11'. More 
than 100 window openings had been bricked-in by 
Pacific Mills during the 1950s. The sash and frames 
of the remaining unaltered 52 windows were deterior- 
ated, but the construction crew was able to repair 


New wooden double hung 
sash windows s with fixed 
transoms } were especially 
milled to duplicate the 
original windows. 
Although this was more 
expensive than new alu- 
minum one-over-one sash 3 
the architect felt that 
the duplication of the 
old windows was essen- 
tial to retaining the 
character of the mill 
building. (photo 
courtesy of E. Gray 

and reglaze most of these existing windows on the 
s it e . i 

The brick in-fill was removed from 40 of the 100 
altered windows with a jackhammer, the process 
taking two men one day to re-open each window. All 
the bricked-in windows on the first floor of the 
north (main) facade of the mill were re-opened to 
provide light for the mall shops. To comply with 
State code requirements for an opening every 50 
feet on at least one side of a structure, every 
fifth window was re-opened on the second floor. 

To fill these openings, new wooden windows, each 
containing 40 panes of glass, were specially 
milled to duplicate the original windows. 
Replication of the original windows represented 
a more expensive alternative than installing new 
aluminum one-over-one sash. However, project 
architect R. Gray Miller believed that "duplica- 
tion of the old windows was essential to retaining 
the character of the mill building." State and 
Federal officials reviewing the project agreed 
with Miller's assessment. 

Costs for removing the brick in-fill and milling 
new wooden windows averaged $1,200 per opening. 
According to Miller's estimates, installation of 
aluminum windows would have cut costs by one-third, 
for an average of $800 per opening. 

Several new openings were also cut into the 
windowless wall of the in-fill structure on the 
second floor, at the request of the dialysis 
laboratory, which occupies that portion of the 
building. The hospital assumed expenses of 
$10,000 to cover this work. 

The overall window treatment for the Carr Mill has 
been considered by Federal preservation officials 
as a model for other industrial rehabilitation, 
not only because the owners decided to repair the 
existing sash, but also because they saw the 
importance of replicating the missing sash. 

Since the complex was without major entrances, 

the architects lowered the sills on several windows 


on the north side and created new points of entry 
into the mills. This was done with minimal 
destruction of historic building fabric. 

The first major rehabilitation work within the 
mill involved removal of paint from the brick 
walls and from the timber framing system through 
sandblasting. Sandblasting was considered the 
only viable option by the developer for removing 
the paint, although the process was costly and 
caused some damage to the surfaces of the brick. 
In retrospect, the developers have expressed 
dissatisfaction with sandblasting because of 
unanticipated problems from sand accumulating in 
the wooden ceilings and gradually sifting down 
on shops below. 

Although sandblasting of exterior surfaces is an 
unacceptable treatment under the "Standards for 
Rehabilitation, " sandblasting of interior brick 
and of heavy timber structural members in 
industrial buildings is evaluated on a case-by- 
case basis. The open, unfinished spaces of Carr 
Mill were determined not to have significant 
architectural features, and the sandblasting was 
therefore considered acceptable by the State 
Historic Preservation Office and by the Department 
of the Interior. An alternative cleaning method, 
such as chemical removal of the paint, would have 
been encouraged if State or Federal preservation 
officials had had an opportunity to review the 
project prior to completion of this work. 

The original open floor plan of the mill made the 
building's conversion into a shopping mall and 
offices relatively simple. (photo courtesy of 
R. Gray Miller) 


Design of the shopping mall called for two rows of 
shops opening onto a broad central corridor. A 
jog interrupts the corridor midway to break up 
the long length of the mall. Wooden ceilings 
(13 '-8" high) remain exposed on the first floor, 
except where mechanical equipment for the heating 
and cooling system has been boxed in. The 
mechanical system installed during the rehabili- 
tation consists of a chilled water system, with 
electrical resistance coils and heat exchangers. 

Floor plan: mall level. The open floor plan of 
the mill was easily adapted into both small shops 
on the first floor level (as seen in this plan) 
and offices on the second floor level. (George 

Six variations for storefronts were developed by 
the project architect, and individual tenants 
were allowed to chose and adapt their shopfronts 
from these standard designs. Shopowners were also 
responsible for finished construction work in 
their own retail spaces. To increase usable 
square footage within their shops, several store- 
owners constructed lofts to serve as office or 
storage areas. Brilliantly colored banners and 
wood and cast iron benches have been installed to 
add interest to the public mall spaces. 

A public elevator, installed in one of the towers, 
provides major access to the second floor and 
satisfies the need by the hospital and the 
vocational rehabilitation office for handicapped 
access. Construction work on the second floor 
has been more extensive than on the mall level; a 
narrow central hallway gives access to a double 


load of offices. Depending on the preferences of 
the tenants, ceilings on the upper floor have 
been variously dropped or left exposed; floors 
have been either refinished or carpeted; and 
masonry walls have been exposed or covered with 
gypsum board. Special design considerations for 
the dialysis laboratory were facilitated by 
architect Miller's previous experience with 
design of a similar center in Charlotte, North 
Carolina. An emergency power system and other 
modifications to the building's electrical plan 
were the major items needed for the laboratory. 

Both the grocery and drug stores 3 shown here on the 
lefty are compatible with the mill in terms of 
scale and material. The segmental arched windows 
of the older building are echoed by the openings 
of the new. (George Siekkinen) 

In keeping with the Secretary of the Interior's 
"Standards for Rehabilitation," the design of the 
new brick-faced grocery and drug store building 
is contemporary but compatible in scale, color, 
and materials with the old mill. The mill's 
arched windows were used as a motif for the 
design of the new structure, both for the 
entrances and the store display windows. 

Project Economics 

Although the Carr Mill rehabilitation project was 
initiated prior to enactment of the Tax Reform 
Act of 1976, the partnership undertaking the 
project is now using the tax incentives in a situa- 
tion that is typical of many other rehabilitations 


certified since the law went into effect. The 
Carr Mill partnership has chosen the alternative 
of the five-year writeoff of rehabilitation ex- 
penses which enables it to operate at an annual 
loss for Federal income tax purposes. Each year 
this loss is allocated to the partners according 
to a profit and loss percentage that is determined 
by the partnership agreement. The individual part- 
ner thereby obtains a tax shelter for income from 
other sources. While the tax situation for each 
partner varies, the overall effect of the five-year 
amortization provision is to provide a greater shel- 
ter for income than would be provided without the 
use of the rehabilitation provision. 

Carr Mill is a general partnership consisting of 
two partners, the EDY Corporation and Rarco- 
Carrboro, the latter being a limited partnership. 
These two entities share interests in the partner- 
ship on a 50-50 basis. The Rarco-Carrboro partner- 
ship consists of four limited partners. Three of 
them are individuals with one-third interest each, 
and the remaining one percent of the partnership 
interests belong to Rarco, Inc. 

The narrative and figures that follow explain how 
Carr Mill, the general partnership, applies the Tax 
Reform Act provisions, codified in sections 191 and 
167(o) of the Internal Revenue Code (IRC). It must 
be noted that the dollar amounts used in this ex- 
planation are only approximations. Each taxable 
year is different in terms of actual income and 
expenses and, as of August, 1979, Phase III of the 
project (additional rehabilitated office space) is 
still being put into operation. 

Under proposed rulemaking for section 191 of the IRC, 
the partnership may deduct from its income, each year 
for five years, one-fifth of the total amount of qual- 
ified rehabilitation costs, including direct construc- 
tion costs and indirect or "soft" costs, such as arch- 
itectural, engineering, legal and brokerage fees. 
Costs of new construction, landscaping, parking 
lots, and purchase of the building itself are ex- 
cluded from the five-year writeoff provision. 
Interest on construction financing is amortized 
separately over a ten-year period. 


Table A shows the project costs for the Carr Mill 
rehabilitation. Costs for Phase III are projected, 
since final figures are not yet available. Indirect 
costs for all three phases total $175,000 and are 
broken down in Table B. 


Property Acquisition 
Land (8 acres) 
Mill building 

Project Costs 


Phase I (retail/commercial) 

Direct construction $1,115,000 
Indirect 85,000 

Phase II (office) 

Direct construction $760,000 

Indirect 40,000 

Phase III (office) 

Direct construction $450,000 
Indirect 50,000 

Total project costs 


$1,200,000 (Includes $690,000 rehabili- 
tation and $510,000 new 

$800,000 (All rehabilitation) 

$500,000 (All rehabilitation) 



Breakdown of Indirect Costs 

Architectural fees 


Legal fees 


Engineering fees 

12 , 000 



Brokerage fees 


Interest on construction loan 






Amortizable rehabilitation costs are derived as 

Total project costs 

Less purchase price of 
land and building 

Less cost of new 

Less cost of construction 

Annual amount amortizable 
($1,906,000 divided by 
five years) 




- 84,000 




Annual Income Statement 

Income $572,394 

Retail/commercial $286,362 
Offices 286,032 

Operating expenses -137,191 

(see Table D for breakdown) 

Net income before debt service $435,203 

Debt Service -286,025 

Phases I and II $230,940 
Phase III 55,085 

(see Table F for calculation 
of debt service) 

Cash flow before taxes 



Annual Operating Expenses 



Advertising and dues 




Maintenance, repairs, onsite 









Parking lot cleaning 


Legal and accounting fees 




Water, sewer, electric 


Lease on parking lot 


Petty cash 


Projected for Phase III 


Total annual operating 

expenses $137,191 

The next step in calculating how this estimated 
annual deduction of $381,200 works for tax purposes 
involves examination of an annual income statement 
for the operation of the Carr Mill mall. Table C 
shows that the cash flow before taxes for the 
partnership is $149,178. Note that total debt 
service (interest plus principal of the mortgage) 
is subtracted from the annual net income to find 
the before tax cash flow. For income tax purposes, 
only the interest on a loan is deductible; thus, 
the calculations below show the addition of the 
mortgage amortization to the before tax cash flow 
amount. (Mortgage amortization is separate from, 
and should not be confused with, the amortization 
option of the Tax Reform Act provisions explained 


Before tax cash flow 
Mortgage amortization 
(see Table H) 

Less depreciation 
(see Table I) 

Less annual amortization of 
allowable rehabilitation 

Taxable income (Loss) 

Income sheltered 

Year 1 





For purposes of simplication , the $229,247 loss in- 
curred in the first year by Carr Mill can be 
rounded off to $230,000. The partnership would sus- 
tain a loss which would be distributed as follows: 
EDY Corporation: $115,000 

Rarco-Carrboro: 115,000 

Rarco-Carrboro , the limited partnership, would in turn 
distribute the loss of $115,000 as follows: 
Each of three equal partners $37,950 
Rarco, Inc. 1,150 

Table E shows the application of the five year write- 
off under section 191 of the Internal Revenue Code 
as projected through year six. 


Pro Forma 

Year 1 

Year 2 









Before cash flow 











Plus mortgage 






















Less depreciation of 

new construction 











Less annual amortiz- 











ation of allowable 

rehab costs 









Taxable income 











After tax cash flow 











Income sheltered 









Through year five, the partnership continues to sus- 
tain a negative taxable income, though this loss de- 
creases each year as the annual mortgage amortization 
payments increase. In year six, the five-year amor- 
tization writeoff no longer applies, and the part- 
nership realizes a taxable income of $188,692. 


The tax situation for the individual partners will 
vary. Due to the complexities involved in the tax 
laws pertaining to partnerships, specific tax bene- 
fits accruing to individual partners cannot be dis- 
cussed in this analysis. 

The Carr Mill project was financed by private mort- 
gage money obtained by Carr Mill, Inc. Using 
$300,000 in equity contributions and the mill build- 
ing as security, the partnership obtained a $1.2 
million construction loan in August 1976 from 
Mutual Savings and Loan in Charlotte, North Carolina, 
which also agreed to provide the permanent financing. 
This loan covered rehabilitation of the first floor 
of the mill ($690,000) and new construction of 
retail space ($510,000). Mutual Savings and Loan 
stipulated that 65 percent of the total retail 
space in the mill be leased before the permanent 
loan could be taken out . 

As work progressed on the first floor of retail 
space (Phase I) , the partnership decided to pursue 
rehabilitation of the second floor for office space. 
In early 1977, they approached Lat Purser and 
Associates, Inc., a Charlotte mortgage company, for 
the additional $800,000 financing that was needed 

for Phase II. Purser and Associates subsequently 
convinced Connecticut Mutual Life Insurance Company 
of Hartford, one of Purser's mortgage correspon- 
dents, to provide a permanent loan which encompasses 
both Phases I and II, including both new construction 
and rehabilitation. 

Connecticut Mutual has developed special expertise 
in rehabilitation lending by financing several 
major rehabilitation projects across the country. 
In the case of Carr Mill, the Company lent $2 million 
or approximately 70 percent of the total project costs of 
$2,800,000, with no lease requirements since a high 
proportion of both retail and office space had al- 
ready been leased prior to the refinancing. An 
interim financial step in the refinancing process 
consisted of securing a short-term $2 million loan 
while the permanent financing was being arranged. 
This interim loan was obtained from North Carolina 
National Bank, a Charlotte, North Carolina, firm 
which itself is taking advantage of the Federal tax 
incentives by amortizing the cost of their rehabili- 


tation of an historic seven-story branch bank build- 
ing in downtown Durham. 

With the new 20 year loan, obtained at an annual 
interest rate of 9 3/4 percent, Carr Mill paid off 
the construction loan from Mutual Savings and Loan 
and completed rehabilitation of the second floor of- 
fice space (Phase II) . The third and final phase 
of rehabilitation was undertaken in late 1978 and 
early 1979. To finance this conversion of additional 
office space in the east wing of the mill, the dev- 
elopers arranged a second loan for $500,000, also 
from Connecticut Mutual. The terms of this loan are 
25 years at an annual interest rate of 10 percent. 

The composite picture of the financing for all phases 
of the Carr Mill project, including annual debt ser- 
vice, is shown in Table F. 



Total project costs $2,800,000 


Loan 1 2,000,000 

Loan 2 500,000 


Equity contribution $300,000 


Annual debt service (computed from expanded payment table on an 
annual payment basis) 

First year 

Amount of loan Interest rate Annual payment principal & interest 

$2,000,000 9 3/4% $230,940 $35,940 + $195,000 

500,000 10% 55,085 5,085 + 50,000 

Total $286,025 Total $41,025 + $245,000 

The total project costs of $2,800,000 covered the 
rehabilitation of 70,796 square feet of net rental 
area, both retail and office space, plus new con- 
struction of 36,225 square feet of retail area. The 
total net rental area equals 107,021 square feet (see 
Table G for a breakdown by phases of construction) . 





Total rehabilitated space 
in old mill 

Gross (sq. 


Net (sq. 


New space constructed 



Breakdown by construction 

Phase I 

Rehabilitated shops 
New shops 


Net (sq. 



Phase II 

Rehabilitated mill offices 24,265 

Phase III 

East wing rehabilitated offices (est.) 19,590 

Total project area (net sq. ft.) 107,021 

Total costs of the entire redevelopment project, in- 
cluding property acquisition, soft costs, and new 
construction, were $26.16 per square foot of net 
rental area ($2,800,000 divided by 107,021 square 
feet). If new construction is excluded, rehabili- 
tation costs on a square foot basis are slightly 
higher: $28.11, calculated as follows. Using total 
construction costs of $2,500,000 ($2,800,000 less 
$300,000 in acquisition costs), and then subtracting 
$510,000 in new construction costs, results in an 
estimated rehabilitation costs total of $1,990,000. 
On the basis of 70,796 square feet of rentable 
rehabilitated space, rehabilitation costs are $28.11 
per square foot ($1,990,000 divided by 70,796 square 
feet) . 

Rental rates in Carr Mill vary according to the type 
of tenant. Commercial tenants pay at an average rate 
of about $4.50 per square foot of retail space ($286,362 
divided by 63,166 square feet). This rate includes a 
fee which covers certain common utilities such as mall 
lighting. Office space rents at an average rate of 
$6.50 on a square foot basis ($286,032 divided by 
43,855 square feet), which includes the lessees' util- 



Mortgage Amortization 

Loan 1: $2,000,000 

9 3/4% for 20 years: annual payment= $230,940 
Loan 2: $500,000 

10% for 25 years: annual payment= 55,085 






Balance of loan 

1 Loan 











2 Loan 










3 Loan 










4 Loan 










5 Loan 










6 Loan 












*Interest + principal each year = $286,025 


Depreciation Schedule 

Cost of new construction: $510,000 

Assume 20 year life and 150% declining balance method of depreciation 

(calculation: $510,000 divided by 20 years times 150% = $510,000 x .075) 

.075 = factor x balance remaining each year 








Depreciation on the old mill equals zero because its book value at the 
time the Carr Mill partnership acquired it was $4,300. In 1976, the 
shell was valued at zero for depreciation purposes. 

Balance remaining 





















Tenants in the mall shops generally hold three- 
year leases with the exception of the grocery and 
drug stores which have 25 and 15-year leases, res- 
pectively. The leases of the 27 office tenants 
range from one to ten years. Most of the mall 
shops are locally owned with about 30 percent of 
the tenants operating as first-time business owners 
The retail shopowners have formed a merchants' 
association to handle advertising; their annual 
dues are matched by the Carr Mill partnership. 


Project Benefits 

The commercial portions of the development employ 
approximately 155 people (83 work in the grocery 
and drug store, and the remainder are managers or 
employees of the mall shops) , An additional 
84 people are office employees working in the 
mill, for a total of 239 jobs within the complex. 
Although most of the office positions were pre- 
existing in other locations in Carrboro, most of 
the jobs in the commercial businesses represent 
new employment in the town. 

In addition to these concrete economic benefits, 
the mill redevelopment has had other, less 
tangible, influences on the town. The success — 
and perhaps the competition — of the mill project 
has encouraged other businessmen in downtown 
Carrboro to make improvements on their commercial 
properties, As a result of the complex and 
lengthy reviews of the Carr Mill Project, the 
town aldermen and municipal staff have become 
more experienced in their dealings with devel- 
opers, and they are applying this new expertise 
to negotiations with other prospective developers 
of Carrboro property. The town has also begun 
to look more aggressively for Federal and State 
funds and programs to spur further community 
revitalization. The town-initiated construction 
of the farmer's market on one of the Carr Mill 
parking lots was one of the first of these new 
efforts to come to fruition. 

A significant financial gain has also come to 
the community in which Carr Mill is located 
through an increase in sales taxes resulting 
from the new business operations on the property. 
Sales revenues from the complex, estimated at 
$10.5 million in 1978, are taxed at four per 
cent; three per cent goes to the North Carolina 
Department of Revenue and one per cent, or 
$105,000 is returned to the county. 

The greatest direct impact on Carrboro and the 
county from redevelopment of the mill comes from 
the increase in annual property taxes. Prior to 
rehabilitation work, the mill property was 
valued at $304,700 ($74,700 for the land, and 


$230,000 for the building), In 1975, at an 
annual tax rate of $1.60 per $100 of valuation, 
the mill property paid $4,875 in taxes. After 
rehabilitation, the mill was valued at $1,538,500 
($77,400 for the land, and $1,461,100 for the 
building). In 1978, at an annual tax rate of 
$1.94 per $100 of valuation, the property paid 
$29,847 in taxes, an increase of almost $25,000 
over pre-rehabilitation payments. 

Several minor one-time financial benefits to the 
town of Carrboro have also accompanied redevel- 
opment of the mill. Payments for building 
permits, based on the cost of construction work, 
amounted to $1,454 for the project. From each 
commercial tenant , the town has received an 
average of $25 for a 'privilege license," 
required to operate a business in Carrboro. 

In the ground floor mall space two rows of shops 
open onto a broad central corridor. Multi- 
colored banners and period benches enliven the 
atmosphere and make the public space inviting to 
shoppers. (photo courtesy of Margaret A. Thomas) 

The rehabilitation of Carr Mill has not only 
generated new jobs and a larger tax base but has 
preserved an historic industrial complex by 
recycling it and giving new life to the surround- 
ing area. Section 2124 of the Tax Reform Act of 
1976 is providing the four partners of Carr Mill 
with a substantial tax deduction over the first 


five years of ownership that they would not have 
had otherwise. As a consequence of taking 
deductions earlier, the partners' tax liabilities 
are postponed so that a return can be earned on 
those funds in the intervening period. While 
the Carr Mill project would have been rehabili- 
tated without the incentives, developer B.J. ' 
Allison emphatically states that future projects 
will be undertaken by him because of the Tax 
Reform Act of 1976. 



This case study was written by Margaret A. Thomas, 
Architectural Historian, Technical Preservation 
Services Division, Heritage Conservation and 
Recreation Service (HCRS) . Assistance in the 
preparation of this study was provided by B.J. 
Allison, of the Carr Mill partnership, 
project architect R. Gray Miller; the staff of the 
North Carolina Division of Archives and History; 
and the staff of the National Register and Technical 
Preservation Services Divisions, especially Emma 
Jane Saxe who prepared the project economics 
section and Margaret A. Doyle Who provided 
editorial assistance. 

This publication has been prepared pursuant to 
section 2124 of the Tax Reform Act of 1976 and 
Executive Order 11593, "Protection and Enhance- 
ment of the Cultural Environment," which directs 
the Secretary of the Interior to "develop and 
make available to Federal agencies and State and 
local governments information concerning profes- 
sional methods and techniques for preserving, 
improving, restoring and maintaining historic 
properties." Comments and suggestions are welcome. 

Cover: Carr Mill (-photo courtesy 
of Balcor Corporation) 

September 1979 

As the Nation's principal conservation agency, the 
Department of the Interior has basic responsibilities 
to protect and conserve our land and water, energy 
and minerals, fish and wildlife, parks and recreation 
areas, and to insure the wise use of all these resources, 
The Department also has major responsibility for 
American Indian reservation communities and for people 
who live in Island Territories under U.S. administration, 

The Heritage Conservation and Recreation Service, 
a non-land managing agency within the Department, 
is responsible for assuring the identification, 
protection, and beneficial use of our important 
cultural, natural, and recreational resources. The 
Service offers grant assistance, technical information, 
and guidance to those in the public and private sectors 
involved in conservation or recreation projects. 

HCRS Publication No. 22 


For sale by the Superintendent of Documents, U.S. Government Printing Office 
Washington, D.C. 20402 

Stock No. 024-01&-00117-6